Two years ago Iberiabank Corp. of Lafayette, La., said it wanted to be in three areas of Arkansas — Little Rock, Jonesboro, and the northwest part of the state.
It moved into the first two markets last year through acquisitions and entered the third this week in a less conventional way: by acquiring the nine branches of the failed ANB Financial of Bentonville.
Regulators shut down the $1.9 billion-asset unit of ANB Bancshares Inc. late Friday, and its branches opened Monday under the name of Pulaski Bank and Trust, Iberiabank's Arkansas subsidiary.
Iberiabank gained $213 million of deposits in the deal — for a mere 1% premium — without taking on any of the distressed assets that led to ANB's failure. The purchase included $236 million of assets (mainly cash, cash equivalents, and securities) but just $2 million of loans, which are secured by borrowers' deposits.
Daryl Byrd, Iberiabank's president and chief executive officer, said in a conference call Monday that the purchase of the ANB branches gives his $4.9 billion-asset company a foothold in Arkansas' robust markets.
"With this acquisition we have exceptional and comprehensive distribution systems in all three markets upon which we can grow the Pulaski franchise in," he said.
Parts of northwest Arkansas, home to Wal-Mart Stores Inc. and Tyson Foods, have been hard hit by the real estate downturn, saddling banks doing business there with scores of nonperforming loans. But its population and job growth have been among the strongest in the country, and it remains one of Arkansas' most attractive markets.
Mr. Byrd did not return calls from American Banker, but observers said the purchase of the ANB branches puts Iberiabank and its Pulaski subsidiary in good position to pick up loan and deposit business as others focus on fixing their credit problems.
Iberiabank has had its own issues in Arkansas. A number of loans it inherited in the two acquisitions it made last year soured, and its nonperformers surged in the fourth quarter. But the company reported slight credit-quality improvement in the first quarter as more homes were sold and builder loans were repaid.
Iberiabank entered Arkansas in January 2007 by acquiring the $488 million-asset Pulaski in Little Rock. It later bought the $707 million-asset Pocahontas Bancorp Inc., which was merged into Pulaski.
ANB's problems stemmed largely from aggressive construction and development lending in its home state and in Idaho, Wyoming, and Utah. Its loans were funded largely through brokered deposits.
The 1% premium Iberiabank paid on the core deposits was a relative bargain; It said the average premium banks have paid on deposits of banks that have failed since 1992 is 4%.
The acquisition also fits in with Iberiabank's strategy of acquiring retail networks and deposits and growing loans organically, said Bryce W. Rowe, an analyst with Robert W. Baird & Co. Inc.
"I think it solidifies or at least helps people put into perspective what they are trying to accomplish in Arkansas and in their whole operating model," he said. "They try to acquire branch distribution systems and deposits and build the commercial lending platform organically through hiring people."
Iberiabank is employing that strategy in Memphis. It inherited two branches near Memphis in the deal for Pulaski, and this week announced it had hired Greg Smithers as market president. Mr. Smithers joined Iberiabank from First Horizon National Corp.'s First Tennessee Bank, where he headed commercial banking.
The acquisition of the ANB branches is not expected to add to earnings until Iberiabank deploys the deposits into loans.
"In the short term. all this liquidity will put pressure on earnings," said Bain Slack, a senior vice president with KBW Inc.'s Keefe, Bruyette & Woods Inc.
But in today's operating environment, too much liquidity is a good problem to have, he added.
"I would rather a bank suffer from excess liquidity and a stronger balance sheet even if earnings suffer in the short term," he said.
John Davis, Iberiabank's executive vice president of mergers and acquisitions and investor relations, said in the conference call that deploying those deposits will likely be a "matter of months, not quarters."
